So a friend and I wish to purchase a home to rent out to people as a test to see if it is a viable way to make extra cash or if it is too much of a headache. As this is new, we don’t know what type of loan we should get from the bank for the house. Most places online seem to be just for buying a house that you live in, and correct me if i’m wrong, but i thought we’d have to get a different type of loan, which i can’t seem to find any information on. My friend and i are currently living in different states, which is making coordination more difficult at the moment. The realitor for the house we are looking at hasn’t replied to our inquiries, and we’d like to know going in what we need, so is there people here who have experience in this sort of thing who know what type of loan information we need?
You really should probably call a mortgage broker - ask around and see if you know anyone who has a good one.
My understanding is that the mortgage is not very different from a normal residential mortgage, but that banks often want a 20% down payment for property that you are not planning to live in.
No need to work through a broker if you don’t want to, just call a bank or mortgage company that has a rate you like and explain the situation. Chances are you’ll have to pay a higher interest rate than if you were living in the house. But if you and your friend are in separate states, how are you going to decide who handles the maintenance?
Actually, besides just a mortgage broker, you would want to call a title company in your area as well. There are all sorts of “extras” when purchasing a second home. The only differance on the loan itself is that your lender would probably require what’s known as an Assignment of Rents, where you must declare a certain percentage of the income from rental to go towards payment of the loan itself. It’s pretty standard.
As for the two of you in different states, that only makes it a hassle for the bank, and a hassle for the closing. That shouldn’t impact you in any great deal.